How to make money in good times and bad? Ask the CEO’s of Citi / Citigroup/ Citicorp… or what ever. The CEO’s have made truck loads of money building Citigroup from Citicorp (by acquiring Travellers insurance company and rebranding it).
John Reed and Sandy Weill made hay for a long time building the empire and then Chuck Prince did some unwinding of the group and some fire fighting and made good bucks. Now Vikram Pandit is in-charge of a major undoing of the empire and he will be rewarded handsomely for that.
Each time the CEO’s change, the management teams change with that. The vision changes. The mission changes. The strategy changes. Companies go from centralizing from functions to de-centralizing them and moving them to different regions. When the management changes and have a new vision, they could then go back from de-centralization to centralization. They could move people, processes, businesses to different regions. Hire outside consultant firms to advice on strategy and management (read expensive). Create project teams to manage the change and assign teams to build new systems to support the change.
All that costs money…. trucks loads of money. And where does that money come from? From the profits that could have been distributed to shareholders.
So when the M&A happens, the CEO and senior management gets paid (quite well), and again when they divest and dismantle the companies. Who takes the risk of building of the companies and dismantling of the same? Investors. Who gets rewarded? CEO and senior management. Nice arrangement!
More on Citi:
http://www.fool.com/investing/dividends-income/2009/01/14/rip-citigroup.aspx
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